Today the Social Security Trustees released their annual forecast of the program’s long-term finances. This information is so trusted that it will define the discussion of Social Security reform for the next year. So you ought to pay attention.

That discussion will continue to center on how the nation will pay the rising costs created by Boomers leaving the work force. At this point, the experts expect these costs to overwhelm the program's revenue and deplete its reserves of nearly $2.8 trillion. At that point, the (current) law would lower benefits to match the level of revenue collected by the system.

1. How big is the problem

According to the Trustees, we would need to invest about $12.5 trillion today in order to pay fill the gaps between revenue and expense. Sadly, for every dollar of revenue the program collected in 2016, it created more than $1.20 in promises that no one expects it to keep.

Instead of dollars, the Trustees typically provide two alternate ways to look at that cost. They express the cost to the public in terms of higher payroll taxes to preserve benefits or how much retirees face in benefit cuts. The latest Report forecasts that reduce benefits starting at about 23 percent in 2034. For those inclination to fill the entire Social Security funding gap solely with higher taxes, the price tag on the average American would be nearly 23 percent higher or $1,300 per year.

2. How soon do the consequences arrive

We don't know.

The Trustees continue to believe that Social Security should pay scheduled benefits until 2034 in a good economy. Statistically, that means that the program has about a coin flip chance of paying full benefits that long. Given that year, it means that on average everyone turning 69 this year expects to outlive the system’s ability to pay full benefits.

Someone turning 51 today expects to retire the year that the system commences forced benefit reductions.

17 years is not really a long time to deal the shortfall given how long it takes to implement reform that have a meaningful effect. For example, if we increase the normal retirement age gradually it will reach 68 slightly before 2050.

3. Time is kryponite

Once again, time is driving the system to crisis. The reason is simple. The experts express the problem in terms of time – or what we call "present-value numbers." A shortfall is the amount of money that we need to invest today in order to pay benefits over some period of time. We didn't invest any money at the start of 2015 - and the shortfall grew by roughly $500 billion simply because we changed calendar year. Again, at the start of 2016, we did not invest any money so the problem grew by another $500 billion.

4. The Affordable Care Act

You might think that the Affordable Care Act would not directly affect Social Security. It does in a very surprising way. The Trustees have believed since 2010 that the slower growth in healthcare costs would translate into higher wages.

This year the Trustees cited that new projections by the Centers for Medicare and Medicaid Services which suggest that corporate savings on group health insurance premiums will be smaller than expected.

5. Disability Improves to 2028

While some in the administration do not believe that Disability is part of Social Security, it is. Moreover, it has shown substantive improvement. The number of disability beneficiaries fell in 2016. This news was the primary reason that the Trustees extended the exhaustion point of the DI-Trust Fund from 2023 to 2028. These costs aren't as bad as we expected.